Debating Fed moves

Good morning, readers.?Phil Rosen here, reporting from Manhattan. Christmas is 19 days away and the weather's getting colder, but sooner still is the next Fed meeting, eight days out, and the economy's still running hot.

Traders are largely expecting policymakers to make a 50-basis-point rate hike, a smaller move than the previous four 75-basis-point increases.?

But next week's adjustment isn't what's top of mind for Wall Street's top Fed commentators — they're looking ahead to next year.

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1. Predicting Fed moves can be like reading tea leaves:?It's not an exact science. There are so many inputs and so many voices (many from within the Fed itself) giving conflicting views that it can be a lot to decipher.

And right now, the debate is raging.?

The latest jobs data came in much hotter than expected, and that's given markets renewed jitters that the Fed's going to have to keep this up if it's going to succeed in bringing down inflation.?

Surging wage growth in the November non-farm payroll report is likely to hinder the Fed's mission, according to UBS strategists, and that will lead it to?maintain its hawkish campaign.?

The Swiss bank published a Monday note?to clients forecasting that the Fed will likely raise benchmark rates?higher than the 5% mark,?which financial markets are currently pricing in as the likely peak.?

The Fed Funds rate is currently set in the 3.75% to 4% range.?

"Friday's jobs report indicated that the labor market remains tight," the UBS team wrote. "The 0.6% growth in average hourly earnings is too high for the Fed's liking and heading in the wrong direction."

To Bridgewater chief investment officer, Rebecca Patterson,?the Fed would be justified in surprising markets by?holding rates higher for longer.?

"The market's anticipating right now that we get significant rate cuts starting in the second half of next year, and we think without?severe economic weakness?to justify that, we're going to get the Fed pausing, but not cutting," she said in a Bloomberg interview Monday.

The easy-money era is coming to a close, Patterson added, and the years ahead likely won't exhibit the same low inflation, low volatility qualities of the recent past.?

Sustained elevated rates?are going to usher in dramatic changes to the economic landscape — and former Treasury Secretary?Larry Summers agrees. He said the Fed will have to hike rates even more aggressively, as inflation remains stubborn and persistent.?

Yet Wharton professor Jeremy Siegel?is on the other side of the debate. In a recent interview, he?roasted Fed Chair Jerome Powell?for failing to see signs of falling inflation.?

"Very honestly, I don't know what planet he lives on," Siegel said on CNBC Friday, pointing to?falling home prices?and other indicators.?

"To be blunt, here's a Fed that caused the inflation by expanding liquidity greater than any other time in history, is basically talking as if, to the worker 'we're not going to let you catch up?to the inflation that I caused,'" Siegel said. "That's a slap in the face to the American worker, in my opinion…Is that good public policy?"

What's your outlook for Fed policy?

A) The Fed will hike in December and then hit pause

B) The Fed is going to keep hiking rates through the first quarter

C) The Fed will raise rates beyond the first quarter

Let us know in the comments.

In other news:

2. Bank of America strategists recommended this batch of high-returning, high-yielding stocks right now.?These names are set to hold up best as a slowing economy slips into a recession, according to the firm.?See the list of 13 companies here.

3. A 26-year-old who ditched his 9-to-5 is now making up to $107,000 in revenue a month through Amazon.?He uses three key data points to determine which products will sell best online —?and explains the strategies that have helped him land suppliers and gain profits.

4. This real-estate investor just walked away from a 6-figure day job to retire early and live off his portfolio.?He owns 16 units and said he follows the "four times" rule.?Here are the four investment techniques that have prepared him to weather an economic downturn.

5. The job market is still hot and showing plenty of resilience.?Based on the robust recent growth in earnings and employers adding jobs at a fast clip, workers still have bargaining power, according to one expert.?Dig into the details.

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This newsletter was curated by Phil Rosen.